Climate Scenario Analysis: Current Practice and Disclosure Trends

Climate change is impacting societies across the world and is an inevitable part of our future.
Its impacts are multifaceted and difficult to predict, driven by physical changes to the climate system, shifting policy landscapes, geopolitical issues, technological developments and
growing public demand for action. Companies therefore face the challenge of remaining
resilient as a climate-changed future unfolds.
Scenario analysis has a long history in helping companies prepare for complex and uncertain
futures. Scenarios provide hypothetical constructs of possible future states that are used to
challenge prevailing assumptions and to analyse business model resilience. Recently, it has
become a focal point for corporate responses to climate change and associated disclosures,
with it playing a core role in the 2017 Recommendations from the Taskforce on Climate-related
Financial Disclosures (TCFD).1
Climate scenario analysis helps companies to identify and prepare for the impacts that climate
change will have on their business models by guiding a structured exploration of different
possible futures to identify the most relevant risks and opportunities. It aims to enhance
business resilience in a climate-changed future, by building capacity for anticipating surprises,
identifying risks and opportunities, and collaborating across a company and its supply chain.
The purpose of this report is to shed light on why and how companies get started with climate scenario analysis. It highlights the practical steps taken by the teams interviewed and the observed challenges and best practices. It may therefore provide scaffolding to help companies tailor their own process and approach to climate scenario analysis.
The report examines the processes through which companies produce their scenario analyses, and how these shape their outcomes.